Study for Insurance Covers - Essay Example

STUDY OF INSURANCE COVERS (AUSTRALIA) (A) Answers to Question Rob Howard has an Essentials plus House and Contents Policy with CGU. One morning for knowing the cause of water leaks in the room he climbs up into the roof and find that it is caused by a defective hot water system that will need replacing. On his way back to the manhole he trips and results in the scratch of side board .In addition to the side board being scratched a crystal vase on the side board breaks when it is knocked to the floor .the vase has a value of $ 1000. But Caroline, Rob’s wife claims the value of it to her is $50000. The validity of the claim of Caroline can be analysed with the Terms and Conditions of CGU’s Essentials Plus house and content insurance policy. CGU’s Essentials Plus House and Content insurance policy involves the following features. Accidental breakage of glass, mirrors etc. will get insurance cover under this policy. For fixed glass that forms part of the building including fixed shower bases, basins, sinks, baths and toilets the insurance cover is available. Mirrors, glassware, crystal, crockery, china (except when being used, cleaned or carried) or glass in furniture (except for glass which forms part of a television or a computer screen/monitor. Essentials plus home insurance product disclosure statement and policy of CGU explains the terms and conditions of this policy. Items covered for accidental breakage include fixed glass like window tinting or shatter- proofing material attached to the glass on the insured buildings. If we insured the contents, any mirrors, glassware, crystal, crockery or any glass in furniture .Mirrors, glassware, crystal, crockery or china are not covered while they are being used, cleaned or carried by hand. Limit for the value of contents: The most the CGS will pay for any one item, pair, set, collection or system is $20000.The contents worth more than $20000 will have to include each as a special content item .To do this the insured must advise the CGS and the items will be listed on the insured’s schedule. For each claim for the building and contents the CGS will reduce the amount they pay for claim by the excess. The amount of excess is shown on the insured’s schedule. The most the CGS will pay for any claim for building or contents is the sum insured shown on the insured’s schedule. In case of additional things this condition is not applied. The cost of rebuilding or repairing the damaged portion of the insured building will be paid by the CGS if the schedule shows “including replacement benefit.” (Accidental Damage. 2006, p. 53). From the analysis of the terms and conditions of the Essentials Plus home and content insurance policy we can see that Rob’s damaged vessel is included in the term contents in the CGS policy and it is sure that the damage is not caused during they are used, cleaned or carried by hand. Hence Rob has the right to claim on the cost of the vessel $1000. Even though Rob’s wife values the vessel $50000, Rob has no right to argue for this excess amount. Because if Rob’s wife values it more than $20000, she must include the vessel’s name as an additional item in the policy schedule .Otherwise she has not the right to claim for even $20000.for his vessel. The schedule shows that the vessel cost $1000 only. Thus we can surely say that Rob has the right to claim for the damage of the vessel, $ 1000 only. Rob Howard has the right to get the cost of repairing the building from the CGS under this policy. (b) The accidental damage policy of CGS has the following features: It automatically covers valuable items worth up to 20% of the contents sum insured, or up to $7500 whichever is higher .In the policy terms it is said that Insurance cover is available with the accidental breakage of contents except for mirrors, glassware, and crystal, and crockery, china being used, cleaned or carried. (Accidental Damage. 2006). If Rob Howard has an Accidental Damage Policy instead of the Essentials plus House and Content policy he has not the right to claim for the cost of damaged vessel because it is not included in the term contents under this policy. It is also said that the Accidental Damage Policy is not available with the breakage of glassware, crockery and crystal being used, cleaned or carried. Hence the damaged vessel of Rob Howard shall not get insurance coverage under the Accidental damage Policy. Answer to question 2: In this case, the Insurance claim has been made in respect of theft of a car. “Auto theft is covered under the comprehensive section of an auto insurance policy. Theft coverage applies to the loss of the vehicles as well as parts of the car such as air bags.” (Auto theft 2008). While arranging for Insurance policies, the insured had stated that his son would be driving his vehicle 50% of the time. In addition, did not report of any previous driving convictions for either himself of his son. After the theft of the car took place, while preparing the claim form, father discloses the fact of his son losing the license for six months for drink driving two years ago when he was living interstate. Now the Insurance Company has blamed father of not disclosing the material facts of lost driving license of his son while preparing the proposal. Here, either the father was not knowing the fact of lost drivers license of his son at the time of original proposal, or purposely did not disclose the material fact fearing the after-effects of the disclosure. However, now the Insurance Company is denying making the claim good for the single reason of non-disclosure of the material facts in respect of cancellation of sons driving license for drink driving, for six months around two years ago. Under such circumstances there are two possibilities, (1) Is there any clause in the Insurance policy that, the loss amount will not be given, if the driver doesn’t have a driving license, (2) Whether cases like drink driving & police indulgence for cancelling driving license matters in making the claim good for the Insurance company. However, the fact that, the insurance claim is made for the theft of a car and not for an accident or damage claim, also should be taken into account, and therefore since the car was not stolen while the son was driving or otherwise, the insurance company should actually refund the amount. Therefore, father should try to make the Insurance company understand the fact, that he was ignorant of his sons crime, and secondly the claim was for theft and not for accident while driving the car, and taking this fact into account Insurance company should try to compensate the loss of the theft car for its present value. Answer to Question 3: Professor Clomp has taken two policies on his house, out of which one of the policies (say A) has been taken long back, many years ago, and at that time his property value was $150,000. However, Professor Clomp took another insurance policy with a new company (say B) for an amount of $250,000 which is the current value of the property. Unfortunately, professor Clump’s property is fully destroyed in a recent summer bushfire. Now Pr. Klomp has to get an amount for the destroyed property from the insurance company. The question arises that, how much amount will each of the Insurance Company a & B give to Pro. Klomp to cover the loss. Since there are two different policies taken from two different companies, it has to be made sure that each of the company should pay partially and make the amount complete. There is another problem, like whether the Insurance companies have any problem in making the payment if the policyholder has same kind of policy in two different Insurance companies. Therefore, rules of each of the Insurance Company should be studied thoroughly, and then check how much amounts each company will provide for the property loss. According to CGU Insurance Limited ‘accidental damage home insurance product’ policy, If the insured property/building suffer any loss or damage and you are unable to live in your home, the costs of alternative accommodation up to 12 months will be provided. However, the loss or damage must have occurred because of incidents that the Insurance Company has agreed to cover. If the Insurance was made only for building, an amount which is equal to the cost of the building material or value of the building will be given and no other loss of commodities or properties kept inside the building will be included in insured amount. According to CGU Insurance policy, the claim is made good, only if the loss or damage occurs within 72 hours of the incident, which damaged the property. However, the company does not pay any amount if the loss is because of structural defect, faulty design or workmanship while constructing the building, thus Prof. Klomp should make the Insurance Company clear about the occurrence of the damages. The CGU Insurance policy also mentions that: “They will cover your buildings or contents for loss or damage as a result of a fire or an explosion. But will not cover loss or damage caused by a bushfire or grassfire within 48 hours of the start date of your policy, unless you took out your insurance with us immediately after another insurance policy covering the same buildings or contents expired, without a break in cover you took out your insurance with us immediately after the risk passed to you as purchaser of your buildings you took out your insurance with us immediately after you signed a lease contract for your buildings.” Now, one issue to be considered is that since there are same kind policy taken by Klomp for the property with two different companies, and whether any of the company has problem with this kind of policy. Company ‘A’ has exclusion in their policy denying liability if the insured is insured with another insurer for the same subject matter. Therefore, the sum insured in company ‘A’ can be fully made good after reasonable claim submitted. Now we have to check whether there is any denial made by company ‘B’, in respect of insurance claim, if same kind of insurance policy is taken with other company. And, if company ‘B’ has any such laws, then the insurance claim will be denied from company ‘B’. However, if company ‘B’ also has no problem in this respect, the insurance claim should be given partly by company ‘A’ and company ‘B’. The property was insured for a sum of $150,000 many years ago in company ‘A’. Present value of property might have increased, therefore the insurance replacement value listed with company ‘B’ amounts to $250,000. Now, both the companies must be informed about the actual loss as also about the sum insured with each company, so that both Insurance company can come into a decision about how much amount each of the company should give professor Klomp for the property loss. Another thing is that since the Insurance policy with company ‘B’ is of higher replacement value, than company ‘A’, company ‘B’ will have to pay larger part of the total amount claimed. (Accidental Damage. 2006). Answer to question No.4: 4.(1) In this case, Barry Gillespie is in a pathetic situation, as he has to actually get the sum insured in respect of the car, as also no loss should be blamed on his brother Garry, as also Barry has to suffer canceling of his policy. Here, there are two options for Barry, a) If sentimental towards his brother for subrogation action to be taken by Insurance company, just withdraw the insurance claim, if need so be ask Garry to repair the car and make it conditioned, and warn him about no such future accidents taking place. By doing so, that is not making any claim to the Insurance Company; Barry can save his brother against any case plus subrogation action by Insurance Company, as also get away from the problem of policy being cancelled by the company, and can use the policy in some other occasion. b) If Barry’s car has been fully destroyed in the accident, and is irreparable or the repairable amount is very high, Barry getting annoyed at Garry’s ignorant driving is quite sensible, therefore without bothering about subrogation action against Garry, Barry can ask the Insurance Company to pay the loss, and ask the company to proceed further with their actions. However, Barry can request not to cancel his car insurance policy, and can ask for forgiveness for giving the car to Garry, without informing the Insurance Company, and convince the company, that in future he will not give the vehicle anymore to anyone else other than the owner without informing the Insurance Company. However, it depends upon the strictness of the rules of the company, whether they will agree to such emotional requests, whether the company has excuses to rules of subrogation etc., as the person who was driving the vehicle was also not having a driving license which is in actual a big crime. Under the Insurance policies there are - Collision and comprehensive coverage’s. According to 123 Auto Insurance information “If you cause an accident, collision coverage will pay to repair your vehicle. You usually cannot collect any more than the actual cash value of your car, which is not the same as the cars replacement cost. Collision coverage is normally the most expensive component of auto insurance. Under Auto insurance policy a package of different coverages is included. Most states require you to purchase a minimum amount of certain kinds of coverage. As like in Barry’s case, if he had purchased the kind of policy under which there are protections against you from a lawsuit or from hefty repair bills, then Barry could have to some extend saved Garry. (Auto Insurance Premiums). In this case, it depends upon what type of Insurance has Barry taken, is there any clause in the policy which can save Garry from the subrogation, or can Barry stop the policy being cancelled. However, Barry can ask the company refund the loss amount, and if need so take a fresh policy for the vehicle. Things a person should do immediately after a car accident takes place: “Call your agent or insurance companys 800-number immediately, even at the scene with the police if possible. Sometimes the police officer can give your insurance company more accurate information rather than information you may not be recording properly because you are upset by the accident. This can save you a lot of time later waiting for your claim to be processed.” However, it is very important to keep your insurance record clean and up-to-date. Then, it also very important to decide whether you should file a claim or not. It does not matter if the accident is your fault or not, you should ask yourself first if you could pay for the damage. Simply put, if you can pay for it yourself without financial hardship, don’t file the claim.” (Sage 2008). Answers to question 4 (2): Domestic motor vehicle theft insurance in Australia: Comprehensive motor vehicle insurance is the most popular type of insurance available for the vehicle. This policy covers the cost of repairing damage to insured’s own vehicle as well as third party property damage, to cover damage to anybody else’s vehicle or property .Theft cover is also included in this policy. Most policies are arranged on a market value basis hence if the vehicle is stolen and not recovered or damaged beyond repair the insurer pays the current market value of the vehicle at the time of the claim. In this policy premiums are based on a number of factors such as type of the car, age of the driver, driving record of the nominated drives and claim history. If the insured has a high performance vehicle, and he is under the age of 25 or have an adverse driving and claims history this can substantially increase the premium that will need to pay by the policy holder. (Motor Vehicle Insurance 2008). Commercial motor vehicle insurance: In commercial motor vehicle insurance the loss or damage to commercial vehicles is covered GIO commercial Vehicle insurance is available for the insurance cover for commercial motor vehicles. A GIO commercial motor vehicle insurance policy can provide insurance cover against theft and accidents for cars used for business purposes .it also covers legal costs and damage to other people’s property caused by the insured’s vehicles up to $30 million. Under this two types of cover is available that is comprehensive cover and legal liability cover. 1. Comprehensive cover: In comprehensive cover the loss of or damage to the insured vehicle caused by an event in the period of insurance. The loss or damage caused by the vehicle gets covered under this policy. 2. Legal liability cover: Under the legal liability cover for the damage caused to another person’s property and legal costs up to $30m.it covers the legal liability for personal injury caused by the insured’s vehicle and legal costs to a maximum of $30m.The legal amount to be paid by the insured for the loss or damage include pay for personal injury . (Commercial Motor Vehicle Insurance). Domestic house insurance cover: Home and content insurance is a type of domestic house insurance available with the house holders. Under this the policy covers the residential building ,domestic fixtures and permanent structural improvements at the insured’s address .Under contents insurance the house hold goods and personal effects owned by the insured are covered. Commercial House insurance cover: Holiday home insurance policy is a type of commercial house insurance. Under this policy two types are available The Building and contents Policy covers for damage to property insured at the situation caused by defined events and provides a number of automatic additional benefits. This policy covers the loss due to damage of buildings. 1. Loss of rent cover: This covers the loss of rent in the event the building or contents is damaged by any of the defined events so as to become UN tenantable. Loss of rent is the loss the insured suffer if their building and /or content by deliberate damage by tenants and the insured lose rental income on the insured property. 2. Deliberate damage by tenants cover: Under this policy insurance cover is given for the loss incurred through deliberate damage of property by the tenants of the insured person. (Holiday Home Insurance Policy 2007). Domestic car insurance: Apia’s comprehensive car insurance policy is a type of domestic car insurance policy. Under this policy insurance cover is available for drivers the loss or damage to the car or damage by the car to other’s property. (Car Insurance Product 2008). Commercial car insurance: this policy covers the loss or damage to the commercial vehicle. Under this policy there are two types of policy are available .they are as follows 1. Comprehensive cover: this policy covers for loss of or damage to the vehicle caused by an accident in the period of insurance .it includes loss or damage to the vehicle by another party even if they are not insured. 2. Third party property damage cover: this policy cover the insured for the amount legally responsible to pay another person because an accident in the period of insurance caused by personal injury or damage to the property. (Car Insurance). Answers to Question 4 (3): Two types of insurance discussed here are Fire insurance and marine insurance. (1)Fire insurance: In fire insurance the insurer undertakes to indemnify the insured against all loss or damage to the house mentioned in the policy, by fire or during the time agreed upon. Important information required by an underwriter in case of fire insurance policy is as follows: (a) Value of the insured property: It is important to the underwriter to know the exact value of the property to be insured before take the risk under this policy. He should know whether the value disclosed by the client is adequate or not. (b) The current position of the property: The underwriter should know whether adequate safety adopted to prevent the property from fire and damage. (c) The ownership of the property: The underwriter should ensure that the insured property is legally owned by the client. Only a legally owned person can insure the property for the loss or damage. (d) Information disclosure by the insured person: it is important to the underwriter to ensure that the insured disclosed all the matters relevant to insure the property. (e) Information about the nature of fire: Destruction or damage to the property insured by its own fermentation ,natural heating or spontaneous combustion or its under going any heating or drying process cannot be treated as damage due to fire under this policy. So it is important for the underwriter to know the nature of fire occurred to the insured property. (2) Marine insurance: Marine insurance falls under commercial insurance. In this policy the insurer takes the risks of loss or damage to goods in transit by sea. Export and import shipments, goods in transit by sea, goods carried by coastal vessels, etc. will get insurance cover under this policy. Information required by the under writer for this policy are as follows; (a) The Original invoice and packing list of goods in transit by sea: This will help the underwriter to know the actual value of the goods contained in the insured vessel when claim on damage or theft occurred on it. (b) Document of declaration of consignment: It is also help to calculate the value of goods in transit by the vessel when loss or theft occurred on it. (c) Damage certificate from the carrier: Damage certificate regarding the loss by sink or theft from the carrier is must for paying the claim amount .This certificate is evidence that the loss or theft of the insured property is certified by the owner themselves. (d) Damage certificate from the Ship board: The damage to the marine property should be certified by the Shipboard of the country in which the property is registered. This certificate is legal evidence regarding the damage of the marine property. So it should ensure by the insurer that the Ship board is certified the damage of the insured marine property. Conclusion: In the field of insurance there are a wide variety of products available for meeting the requirements of different types of clients. Separate insurance cover is available for domestic and commercial property. These varying insurance products are adequate to take the risks related to different loss or damage of the insured property. Bibliography Accidental Damage. (2006). [online]. CGU Insurance Limited. Last accessed 19 April 2008 at: http://cgu.com.au/cgu/pub/cgu/website/DocumentLibrary/Personal/Home/C0019.pdf Accidental Damage. (2006). [online]. CGU Insurance Limited. P. 53. Last accessed 19 April 2008 at: http://cgu.com.au/cgu/pub/cgu/website/DocumentLibrary/Personal/Home/C0019.pdf Auto Insurance Premiums. [Online]. 123 Auto Insurance: Insurance Information & Resources. Last accessed 19 April 2008 at: http://www.123-auto-insurance.com/insurance-premiums.htm Auto theft. (2008). [Online]. III: Insurance Information Institute. Last accessed 19 April 2008 at: http://www.iii.org/media/hottopics/insurance/test4/ Car Insurance: 3 Levels of Cover. [Online]. Suncrop. Last accessed 19 April 2008 at: http://www.suncorp.com.au/Suncorp/personal/car_insurance/default.aspx Car Insurance Product: Product Disclosure Statement and Policy Wording. (2008). [Online]. Wise Move: Apia. Last accessed 19 April 2008 at: http://www.apia.com.au/pdf/policy-document-car-insurance.pdf Commercial Motor Vehicle Insurance: GIO Commercial Vehicle insurance. [Online]. GIO. Last accessed 19 April 2008 at: http://www.gio.com.au/gio/commercial/business_insurance/commercial_motor_vehicle.html Holiday Home Insurance Policy. (2007). [Online]. St. George Underwriting Agency. Last accessed 19 April 2008 at: http://www.sgua.com.au/pages/sgua/broker/HHA_WDG2.PDF Motor Vehicle Insurance. (2008). [Online]. Capital Insurance Brokers PTY Ltd and Capital Finance Brokers PTY Ltd. Last accessed 19 April 2008 at: http://www.capitalinsurancebrokers.com.au/cib/default.asp?s=22&contentID=45 SAGE, Bobbie (2008). I Had a Car Accident – Now What?. [Online]. About.com: Personal Insurance. Last accessed 19 April 2008 at: http://personalinsure.about.com/cs/vehicleratings/a/aa120902a.htm Read More